Condensed Guarantor Data

3 Months Ended

Oct. 29, 2016

Condensed Guarantor Data

14. Condensed Guarantor Data

The Company’s 100%-owned domestic subsidiaries have fully and unconditionally guaranteed the Notes, subject to the customary automatic release provisions described above (see Note 6). The following condensed consolidating financial information presents the results of operations, comprehensive income (loss), financial position and cash flows of The Gymboree Corporation and the guarantor and non-guarantor subsidiaries. The VIE financial results are included in those of the non-guarantor subsidiaries. Intercompany transactions are eliminated.

THE GYMBOREE CORPORATION

CONDENSED CONSOLIDATING STATEMENTS OF OPERATIONS

FOR THE 13 WEEKS ENDED OCTOBER 29, 2016

(In thousands)

	The Gymboree		Guarantor		Non-guarantor
	Corporation		Subsidiaries		Subsidiaries		Eliminations		Consolidated
Net sales:
Retail	$	699	$	269,885	$	12,965	$	(7,239)	$	276,310
Retail Franchise		-		3,517		-		-		3,517
Intercompany revenue		16,368		7,354		135		(23,857)		-
Total net sales		17,067		280,756		13,100		(31,096)		279,827
Cost of goods sold, including buying and occupancy expenses		(1,687)		(169,318)		(9,027)		7,210		(172,822)
Gross profit		15,380		111,438		4,073		(23,886)		107,005
Selling, general and administrative expenses		(23,152)		(102,123)		(3,751)		23,872		(105,154)
Operating (loss) income		(7,772)		9,315		322		(14)		1,851
Interest expense		(19,490)		(416)		(26)		-		(19,932)
Other income, net		81		45		9		-		135
(Loss) income before income taxes		(27,181)		8,944		305		(14)		(17,946)
Income tax benefit (expense)		11,027		(3,614)		(359)		-		7,054
Equity in earnings of affiliates, net of tax		5,262		-		-		(5,262)		-
Net (loss) income	$	(10,892)	$	5,330	$	(54)	$	(5,276)	$	(10,892)

THE GYMBOREE CORPORATION

CONDENSED CONSOLIDATING STATEMENTS OF OPERATIONS

FOR THE 13 WEEKS ENDED OCTOBER 31, 2015

(In thousands)

	The Gymboree		Guarantor		Non-guarantor
	Corporation		Subsidiaries		Subsidiaries		Eliminations		Consolidated
Net sales:
Retail	$	375	$	283,017	$	14,723	$	(8,462)	$	289,653
Retail Franchise		-		5,867		-		-		5,867
Intercompany revenue		16,238		7,529		559		(24,326)		-
Total net sales		16,613		296,413		15,282		(32,788)		295,520
Cost of goods sold, including buying and occupancy expenses		(2,156)		(175,953)		(10,868)		8,364		(180,613)
Gross profit		14,457		120,460		4,414		(24,424)		114,907
Selling, general and administrative expenses		(22,809)		(101,017)		(5,572)		24,371		(105,027)
Operating (loss) income		(8,352)		19,443		(1,158)		(53)		9,880
Interest expense		(21,417)		(489)		-		-		(21,906)
Other (expense) income, net		(185)		(1)		37		-		(149)
(Loss) income from continuing operations before taxes		(29,954)		18,953		(1,121)		(53)		(12,175)
Income tax benefit (expense)		7,208		(8,017)		(26)		-		(835)
Equity in earnings of affiliates, net of tax		12,004		-		-		(12,004)		-
(Loss) income from continuing operations, net of tax		(10,742)		10,936		(1,147)		(12,057)		(13,010)
Income from discontinued operations, net of tax		714		811		1,833		-		3,358
Net (loss) income		(10,028)		11,747		686		(12,057)		(9,652)
Net income attributable to noncontrolling interest		-		-		(376)		-		(376)
Net (loss) income attributable to The Gymboree Corporation	$	(10,028)	$	11,747	$	310	$	(12,057)	$	(10,028)

THE GYMBOREE CORPORATION

CONDENSED CONSOLIDATING STATEMENTS OF COMPREHENSIVE INCOME (LOSS)

FOR THE 13 WEEKS ENDED OCTOBER 29, 2016

(In thousands)

	The Gymboree		Guarantor		Non-guarantor
	Corporation		Subsidiaries		Subsidiaries		Eliminations		Consolidated
Net (loss) income	$	(10,892)	$	5,330	$	(54)	$	(5,276)	$	(10,892)
Other comprehensive income (loss):
Foreign currency translation adjustments, net of tax		(374)		-		(368)		368		(374)
Unrealized net gain on cash flow hedges, net of tax		1,094		-		341		(341)		1,094
Total other comprehensive income (loss), net of tax		720		-		(27)		27		720
Comprehensive (loss) income	$	(10,172)	$	5,330	$	(81)	$	(5,249)	$	(10,172)

THE GYMBOREE CORPORATION

CONDENSED CONSOLIDATING STATEMENTS OF COMPREHENSIVE INCOME (LOSS)

FOR THE 13 WEEKS ENDED OCTOBER 31, 2015

(In thousands)

	The Gymboree		Guarantor		Non-guarantor
	Corporation		Subsidiaries		Subsidiaries		Eliminations		Consolidated
Net (loss) income	$	(10,028)	$	11,747	$	686	$	(12,057)	$	(9,652)
Other comprehensive income (loss):
Foreign currency translation adjustments, net of tax		(44)		-		(232)		34		(242)
Unrealized net gain (loss) on cash flow hedges, net of tax		609		-		(72)		73		610
Total other comprehensive income (loss), net of tax		565		-		(304)		107		368
Comprehensive (loss) income		(9,463)		11,747		382		(11,950)		(9,284)
Comprehensive income attributable to noncontrolling interest		-		-		(179)		-		(179)
Comprehensive (loss) income attributable to The Gymboree Corporation	$	(9,463)	$	11,747	$	203	$	(11,950)	$	(9,463)

THE GYMBOREE CORPORATION

CONDENSED CONSOLIDATING BALANCE SHEETS

(In thousands)

	October 29, 2016
	The Gymboree		Guarantor		Non-guarantor
ASSETS	Corporation		Subsidiaries		Subsidiaries		Eliminations		Consolidated
Current assets:
Cash and cash equivalents	$	1,007	$	4,980	$	3,733	$	-	$	9,720
Restricted cash		27,524		-		-		-		27,524
Accounts receivable, net of allowance		1,668		12,085		1,385		-		15,138
Merchandise inventories		-		259,150		4,414		(437)		263,127
Prepaid income taxes		1,333		588		141		-		2,062
Prepaid expenses		3,859		1,915		10		-		5,784
Intercompany receivable		890		664,599		-		(665,489)		-
Total current assets		36,281		943,317		9,683		(665,926)		323,355
Property and equipment, net		14,409		119,302		5,605		-		139,316
Goodwill		-		346,818		9,963		-		356,781
Other intangible assets, net		-		299,579		24		-		299,603
Restricted cash		68,804		-		-		-		68,804
Other assets		1,706		1,191		2,662		(296)		5,263
Investment in subsidiaries		1,378,604		-		-		(1,378,604)		-
Total assets	$	1,499,804	$	1,710,207	$	27,937	$	(2,044,826)	$	1,193,122
LIABILITIES AND STOCKHOLDERS’ (DEFICIT) EQUITY
Current liabilities:
Accounts payable	$	5,466	$	124,922	$	187	$	-	$	130,575
Accrued and other current liabilities		37,171		63,940		1,235		-		102,346
Line of credit borrowings		80,000		-		-		-		80,000
Current portion of long-term debt		7,577		-		-		-		7,577
Intercompany payable		660,884		-		5,042		(665,926)		-
Total current liabilities		791,098		188,862		6,464		(665,926)		320,498
Long-term liabilities:
Long-term debt, net		970,154		-		-		-		970,154
Long-term sale-leaseback financing liability, net		-		25,467		-		-		25,467
Lease incentives and other liabilities		5,015		39,780		4,482		-		49,277
Deferred income taxes		16,606		94,485		-		(296)		110,795
Total liabilities		1,782,873		348,594		10,946		(666,222)		1,476,191
Total stockholders’ (deficit) equity		(283,069)		1,361,613		16,991		(1,378,604)		(283,069)
Total liabilities and stockholders’ (deficit) equity	$	1,499,804	$	1,710,207	$	27,937	$	(2,044,826)	$	1,193,122

THE GYMBOREE CORPORATION

CONDENSED CONSOLIDATING BALANCE SHEETS

(In thousands)

	July 30, 2016
	The Gymboree		Guarantor		Non-guarantor
ASSETS	Corporation		Subsidiaries		Subsidiaries		Eliminations		Consolidated
Current assets:
Cash and cash equivalents	$	4,952	$	4,607	$	3,077	$	-	$	12,636
Restricted cash		33,505		-		-		-		33,505
Accounts receivable, net of allowance		1,486		10,009		795		-		12,290
Merchandise inventories		-		229,118		4,258		(417)		232,959
Prepaid income taxes		1,332		578		136		-		2,046
Prepaid expenses		3,409		1,508		-		-		4,917
Intercompany receivable		1,311		687,735		-		(689,046)		-
Total current assets		45,995		933,555		8,266		(689,463)		298,353
Property and equipment, net		15,783		122,147		5,821		-		143,751
Goodwill		-		346,818		10,223		-		357,041
Other intangible assets, net		-		300,043		30		-		300,073
Restricted cash		73,566		-		-		-		73,566
Other assets		2,043		1,474		2,682		(471)		5,728
Investment in subsidiaries		1,373,355		-		-		(1,373,355)		-
Total assets	$	1,510,742	$	1,704,037	$	27,022	$	(2,063,289)	$	1,178,512
LIABILITIES AND STOCKHOLDERS’ (DEFICIT) EQUITY
Current liabilities:
Accounts payable	$	8,255	$	126,103	$	140	$	-	$	134,498
Accrued and other current liabilities		50,370		60,121		1,418		-		111,909
Line of credit borrowings		42,000		-		-		-		42,000
Current portion of ABL term loan		5,527		-		-		-		5,527
Intercompany payable		685,536		-		3,927		(689,463)		-
Total current liabilities		791,688		186,224		5,485		(689,463)		293,934
Long-term liabilities:
Long-term debt, net		970,902		-		-		-		970,902
Long-term sale-leaseback financing liability, net		-		25,508		-		-		25,508
Lease incentives and other liabilities		5,227		40,951		4,464		-		50,642
Deferred income taxes		16,198		95,072		-		(471)		110,799
Total liabilities		1,784,015		347,755		9,949		(689,934)		1,451,785
Total stockholders’ (deficit) equity		(273,273)		1,356,282		17,073		(1,373,355)		(273,273)
Total liabilities and stockholders’ (deficit) equity	$	1,510,742	$	1,704,037	$	27,022	$	(2,063,289)	$	1,178,512

THE GYMBOREE CORPORATION

CONDENSED CONSOLIDATING BALANCE SHEETS

(In thousands)

	October 31, 2015
	The Gymboree		Guarantor		Non-guarantor
ASSETS	Corporation		Subsidiaries		Subsidiaries		Eliminations		Consolidated
Current assets:
Cash and cash equivalents	$	1,091	$	4,119	$	12,050	$	-	$	17,260
Accounts receivable, net of allowance		493		15,614		675		-		16,782
Merchandise inventories		-		253,689		8,279		(418)		261,550
Prepaid income taxes		1,514		821		242		-		2,577
Prepaid expenses		3,838		2,250		458		-		6,546
Deferred income taxes		-		14,250		160		(8,469)		5,941
Intercompany receivable		-		596,089		1,051		(597,140)		-
Current assets of discontinued operations		-		41,955		14,730		(38,136)		18,549
Total current assets		6,936		928,787		37,645		(644,163)		329,205
Property and equipment, net		13,408		142,801		7,485		-		163,694
Goodwill		-		346,818		10,201		-		357,019
Other intangible assets, net		-		304,102		44		-		304,146
Restricted cash		4,535		-		-		-		4,535
Other assets		3,261		1,196		3,400		(1,246)		6,611
Investment in subsidiaries		1,404,175		-		-		(1,404,175)		-
Other assets of discontinued operations		-		54,634		2,775		-		57,409
Total assets	$	1,432,315	$	1,778,338	$	61,550	$	(2,049,584)	$	1,222,619
LIABILITIES AND STOCKHOLDERS’ (DEFICIT) EQUITY
Current liabilities:
Accounts payable	$	7,097	$	122,470	$	1,453	$	-	$	131,020
Accrued and other current liabilities		33,102		68,592		3,202		210		105,106
Deferred income taxes		8,679		-		-		(8,679)		-
Line of credit borrowings		50,000		-		-		-		50,000
Current obligation under capital lease		-		591		-		-		591
Intercompany payable		628,692		-		5,641		(634,333)		-
Current liabilities of discontinued operations		-		2,815		10,229		(1,361)		11,683
Total current liabilities		727,570		194,468		20,525		(644,163)		298,400
Long-term liabilities:
Long-term debt, net		1,095,760		-		-		-		1,095,760
Long-term sale-leaseback financing liability		-		25,610		-		-		25,610
Long-term obligation under capital lease, net		-		2,402		-		-		2,402
Lease incentives and other liabilities		5,549		47,169		4,060		-		56,778
Deferred income taxes		1,775		128,833		21		(1,246)		129,383
Other long-term liabilities of discontinued operations		-		438		315		-		753
Total liabilities		1,830,654		398,920		24,921		(645,409)		1,609,086
Total stockholders’ (deficit) equity		(398,339)		1,379,418		24,757		(1,404,175)		(398,339)
Noncontrolling interest		-		-		11,872		-		11,872
Total liabilities and stockholders’ (deficit) equity	$	1,432,315	$	1,778,338	$	61,550	$	(2,049,584)	$	1,222,619

THE GYMBOREE CORPORATION

CONDENSED CONSOLIDATING STATEMENTS OF CASH FLOWS

FOR THE 13 WEEKS ENDED OCTOBER 29, 2016

(In thousands)

	The Gymboree		Guarantor		Non-guarantor
	Corporation		Subsidiaries		Subsidiaries		Eliminations		Consolidated
CASH FLOWS FROM OPERATING ACTIVITIES:
Net cash used in operating activities	$	(31,652)	$	(13,563)	$	(311)	$	-	$	(45,526)
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures		(496)		(4,882)		(117)		-		(5,495)
Decrease in restricted cash		10,743		-		-		-		10,743
Intercompany transfers		421		18,872		-		(19,293)		-
Net cash provided by (used in) investing activities		10,668		13,990		(117)		(19,293)		5,248
CASH FLOWS FROM FINANCING ACTIVITIES:
Intercompany transfers		(20,336)		-		1,043		19,293		-
Proceeds from ABL facility		169,000		-		-		-		169,000
Payments on ABL facility		(131,000)		-		-		-		(131,000)
Payments on ABL term loan		(625)		-		-		-		(625)
Payments on capital lease and sale-leaseback financing liability		-		(54)		-		-		(54)
Net cash provided by (used in) financing activities		17,039		(54)		1,043		19,293		37,321
Effect of exchange rate fluctuations on cash and cash equivalents		-		-		41		-		41
Net (decrease) increase in cash and cash equivalents		(3,945)		373		656		-		(2,916)
CASH AND CASH EQUIVALENTS:
Beginning of Period		4,952		4,607		3,077		-		12,636
End of Period	$	1,007	$	4,980	$	3,733	$	-	$	9,720

THE GYMBOREE CORPORATION

CONDENSED CONSOLIDATING STATEMENTS OF CASH FLOWS

FOR THE 13 WEEKS ENDED OCTOBER 31, 2015

(In thousands)

	The Gymboree		Guarantor		Non-guarantor
	Corporation		Subsidiaries		Subsidiaries		Eliminations		Consolidated
CASH FLOWS FROM OPERATING ACTIVITIES:
Net cash (used in) provided by operating activities	$	(28,711)	$	54,028	$	311	$	-	$	25,628
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures		(1,502)		(2,957)		(611)		-		(5,070)
Decrease in restricted cash		3,622		-		-		-		3,622
Increase in related party loan receivable		-		-		(1,741)		-		(1,741)
Intercompany transfers		2,726		(50,614)		(978)		48,866		-
Other		-		5		(12)		-		(7)
Net cash provided by (used in) investing activities		4,846		(53,566)		(3,342)		48,866		(3,196)
CASH FLOWS FROM FINANCING ACTIVITIES:
Intercompany transfers		44,455		(73)		4,484		(48,866)		-
Proceeds from ABL facility		107,000		-		-		-		107,000
Payments on ABL facility		(127,000)		-		-		-		(127,000)
Payments for deferred financing costs		(1,679)		227		-		-		(1,452)
Payments on capital lease and sale-leaseback financing liability		-		(185)		-		-		(185)
Net cash provided by (used in) financing activities		22,776		(31)		4,484		(48,866)		(21,637)
Effect of exchange rate fluctuations on cash and cash equivalents		-		-		(15)		-		(15)
Net (decrease) increase in cash and cash equivalents		(1,089)		431		1,438		-		780
CASH AND CASH EQUIVALENTS:
Cash and cash equivalent, beginning of period		2,180		3,649		17,668		-		23,497
Cash and cash equivalent, end of period		1,091		4,080		19,106		-		24,277
Less - cash and cash equivalents of discontinued operations, end of period		-		(39)		7,056		-		7,017
Cash and cash equivalents of continuing operations, end of period	$	1,091	$	4,119	$	12,050	$	-	$	17,260

The Company and its guarantor subsidiaries participate in a cash pooling program. As part of this program, cash balances are generally swept on a daily basis between the guarantor subsidiary bank accounts and those of the Company. In addition, we pay expenses on behalf of our guarantor and non-guarantor subsidiaries on a regular basis. These types of transactions have been accounted for as intercompany transfers within investing and financing activities.

The Company’s transactions include interest, tax payments and intercompany sales transactions related to administrative costs incurred by the Company, which are billed to guarantor and non-guarantor subsidiaries on a cost plus basis. All intercompany transactions are presumed to be settled in cash and therefore are included in operating activities. Non-operating cash flow changes have been classified as investing and financing activities.